Re: New EC Thread

[Panda]

societe Generale says there is still a risk and the vote is not sufficiant for Germany , awaiting Troika Report

Greece has never had a current Account surplus in 40 years..

Exports in Germany amount to 46% of GDP...Greece is 13% of GDP

Norway is facing a credit shock as Houshold budget swells says the FSA

Europe job losses climb with Astrazeneca to Pepsi firing employees.

Will Greece follow through with its agreement to adopt the austerity measures? Samares, expected to win the Election and not accept the deal.

Some bondholders have accepted the 70% writeoff but others have not and if they hold out for a better deal Greece will default.


EU Rhen says he is confident the deal will go through.

analyst says the ECB is providing the liquidity but Greece cannot provide the solvency and the Greek saga will continue.

[margaret]

Panda, jsut saw this on twitter and thought of your thread....

http://hat4uk.wordpress.com/2012/02/13/you-thought-chinese-bankers-were-different-think-again/

YOU THOUGHT CHINESE BANKERS WERE DIFFERENT? THINK AGAIN….

COLOSSAL CHINESE DEBT RESTRUCTURE UNDER WAY

Regimes may come and go, democracy may not be present, and markets may be directly regulated by stomping jackboots….but bankers will never change.

Clear information is coming out of China today showing the huge extent to which the nation’s banks have overlent, and the huge extent to which their clients in local government are over-leveraged. For Chinese banks, insert eurobanks. For local government, insert EU member States. It is exactly the same syndrome: dirt-cheap money to accelerate growth turns into an unscaleable debt mountain.

For a start, many of these loans require interest-only payments over much of the repayment period. On a great many of the loans, the loaned principal is waived completely: not so much debt forgiveness as loan forgiveness. Absolutely crazy.

Now, under direct orders from Beijing, banks have restructured the loans to 3-5 times the original duration: the only laternative, it has become apaprent, would be local government default on a massive scale. The sum we’re talking about is estimated by some to be in excess of $2.2 trillion – that’s getting on for two-fifths of Chinese gdp.

A desperate Beijing is using a three-pronged approach: deferrment of maturity (outlined above), direct bailout from the National Bank where the default is already at or near reality, and further ‘forgiveness’ in the form of lowered rates on top of deferred maturity. I understand that while all three have been attempted, the last is becoming the bailout of choice.

While this is only more can-kicking, the big difference with China is that the debts are largely domestic in nature and origin: and of course, even if this were not the case, Beijing formally guarantees all local government debt as a matter of course. There is thus a bailer-out of last resort.

But that Beijing bailing is going to use several billion yards of Yuan paper….another dimension to add to previous fears about inflationary factors in property.

All of which is going to make Barroso & van Rompuy’s offertory plate at tomorrow’s summit look even more cheeky….and even less likely to attract any donations.

Other things making all this seem horribly familiar:

On 4th January last the Beijing government announced that it had discovered ‘certain irregularities’ in bank loans to local government. $85 billion worth to be precise.

Four days later, Channel News Asia reported that local governments across China borrowed billions in a splurge of building bridges, apartments and shopping malls, leaving many insolvent and endangering the country’s financial system. It estimated that local government had borrowed 10.7 trillion yuan ($1.7 trillion) — 27% of GDP — by late 2010. So it’s pretty clear that the madness has continued: Moody’s, for example, thinks the size of the debt is somewhat economical in its estimate.

It’s the species, stupid.

[Panda]

13 February 2012
Last updated at 11:41




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EU 'risks trade war' over carbon trading scheme












Airlines have said the emissions scheme will put more pressure on their costs


Continue reading the main story















Aerospace and Defence

• 
  Rolls-Royce makes record profits
  
• 
  American Airlines cuts 13,000 jobs
  
• 
  French close in on India jet deal
  
• 
  Ryanair reports 14.9m euro profit
  

The European Union's carbon trading scheme may spark a trade war, according to one of the world's biggest planemakers.

"What started out as a solution for the environment has
become a source of potential trade conflict," Airbus boss Thomas Enders
said.

The Emissions Trading System levies a charge on flights in EU airspace based on carbon emissions.

But the US and China are opposed to their airlines joining the scheme.

The EU scheme, which began on 1 January, creates allowances
for carbon emissions and allows airlines to "cap and trade" their
allowances.

The number of allowances is reduced over time, so that the total output of carbon from airlines in European airspace falls.

China has banned its airlines from joining the scheme and the
US tried to block the introduction of emissions charges late last year,
in a case heard by the European Court of Justice.

However, the court ruled that they were legal.

'Ready to negotiate'

The EU insisted that it would not back down, but was ready to discuss the scheme.

"We're ready to negotiate within our framework," Siim Kallas,
the EU's transport commissioner, said at the Singapore Airshow on
Monday. "We aren't trying to dominate the world."

Another European Commission official said: "We recognise just
how strong the opposition is. If there's a global deal, we can amend
ETS.''

The US has called for the issue to be dealt with by an
international aviation body. It, along with Canada, says the charges
levied under the scheme violate climate change and aviation pacts.

China, which has been amongst the scheme's most vocal
opponents, says it could cost Chinese airlines as much as 95m euros
($124m; £79m) in extra annual costs.

The International Air Transport Association called for the
United Nations to broker a deal between airlines and the European Union.

Iata said if not resolved quickly, the issue could hurt all parties involved.

"I very much hope of course that we are not seeing the
beginning of a trade war on this issue and eventually wiser counsels
will prevail," said director general Tony Tyler.

Thanks margaret....when will this madness end and people learn to live within their means?

[kitti]

They are going to CUT the minimum wage and that means people will have to live on £375 per month in Greece .

[Panda]

13 February 2012
Last updated at 16:23bailout crisis: Brussels welcomes austerity vote










Banks were wrecked during rioting in Athens on Sunday


Continue reading the main story








The European Commission has welcomed the Greek parliament's decision to approve tough new austerity measures.

Economics commissioner Olli Rehn urged Greek officials to
"take ownership" and fully implement the reforms, demanded by the EU in
return for a huge bailout.

But the measures attracted massive protests throughout
Greece. Buildings were set on fire in Athens and police used tear gas to
disperse the crowds.

The government confirmed later that an election would be held in April.

Analysts say the biggest party in the governing coalition,
the socialist Pasok, is likely to suffer at the hands of the electorate.

Greece is trying to secure a 130bn euro ($170bn; £110bn)
bailout from the EU and IMF to prevent it defaulting on its massive
debts. The deal, which has not yet been finalised, could write off
around half of Greece's privately-held debt.

The austerity measures were demanded by the European Union as a precondition for releasing the funds.

Greece now has two days to meet two other EU demands: setting
out exactly how it will make 325m euros of the promised savings, and
giving written confirmation that the measures will be implemented
regardless of the outcome of April's election.



Continue reading the main story
“Start Quote

The violence sends a clear and unmistakable message to Brussels: they cannot bank on the new measures being implemented”

Gavin Hewitt
BBC Europe editor

• Read Gavin's thoughts in full
  
• Views from the street
  

European Union finance ministers are due to discuss their decision on the bailout package at a meeting on Wednesday.

Athens has been criticised for failing to implement many of
the pledges it made in the first round of austerity measures, prompting
concern from some EU politicians that the cuts might not be put into
effect.

German Chancellor Angela Merkel hailed the vote as a "very
important step" on the road to Greek stability, but insisted there
"would not and cannot be any changes" to the austerity programme.

Mr Rehn meanwhile said the EU continued to stand by the Greek
people, and insisted that the reforms were needed to ensure future
economic growth.

"The Greek authorities and political forces should now take
full ownership and make the case for the second programme and fully
implement it in order to return the country to stable economic growth
and job creation," he said.

The EU has been the target of much anger among Greeks, who see the reforms as piling unnecessary hardship on ordinary people.



Continue reading the main story
“Start Quote

As ever, the biggest question mark of
all - which was not a question at all for last night's rioters - is
whether the Greek government is right in its assessment, that qualifying
for sticking with the programme is still in the country's best
interests ”

Stephanie Flanders Economics editor

• Read more from Stephanie
  

The measures include slashing 15,000 public-sector jobs as part of a longer-term strategy to get rid of 150,000 civil servants.

The minimum wage is also to be cut by 20% to about 600 euros a
month, and labour laws are to be liberalised to allow easier hiring and
firing of staff.

Financial markets were up slightly after the austerity bill was passed.

But tens of thousands protested against the measures in Athens on Sunday night.

Most of the demonstrators protested peacefully, but small groups were involved in running battles with riot police.

They did huge damage to the city, attacking buildings with petrol bombs, and setting fire to banks, cinemas and cafes.

In all, 45 buildings are said to have burnt in the worst rioting for years. Other businesses were looted and badly damaged.

Continue reading the main story








What went wrong in Greece?





Greece's economic reforms, which led to it abandoning the drachma
as its currency in favour of the euro in 2002, made it easier for the
country to borrow money.











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At least 170 people, most of them police officers, were hurt during the disturbances, and dozens of people were arrested.

Firefighters were still damping down some of the blazes on Monday.

Eurozone finance ministers will closely monitor the situation
in Greece before making further decisions on the bailout package at
Wednesday's meeting.

They rejected a previous set of measures proposed by Athens, demanding an extra 325m euros in savings.

Passing the austerity bill has cost Greece's coalition more than 40 MPs, who were dismissed after refusing to back the plan.

Several ministers have resigned, and a small right-wing party
Laos, the junior member of the coalition, also withdrew its
co-operation.

[Panda]

The Way Greeks Live Now



Lars Tunbjork for The New York Times Petros Vafiadis, with his wife, Ekaterina, and their son Traianos, is an unemployed construction supervisor who says “things will only get worse.” The couple put their sons through college and now have no savings.
By RUSSELL SHORTO

Published: February 13, 2012

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In a little brick-walled taverna in Athens, over a lunch of Cretan salad and stuffed grape leaves, a Greek journalist named Aris Hadjigeorgiou was holding forth one day in late November about the calamitous state of his city and country as only a veteran metropolitan reporter could. He explicated the insidious ways in which the upper echelons of Greek media were intertwined with the political structure, which prevented reporting of financial mismanagement and also clouded any hope for resolving the crisis. And he noted little things, like the leaflets on car windshields advertising moving companies: literal signs of the way the economic crisis was affecting Athens, as people angled for escape routes, either abroad or to the countryside. And how the mayor’s office was at that moment considering a quaint but cockeyed approach for the season’s Christmas lighting scheme: stringing lights around the city’s hundreds of shuttered storefronts.




Enlarge This ImageLars Tunbjork for The New York Times

Ioannis Tsokaras, flanked by two of his workers, quit his civil-service job to cultivate “mountain tea” on his family land on Mount Othrys.



At some point, I asked Hadjigeorgiou how the crisis was affecting him personally. Life was getting difficult, he acknowledged. Then, prodded a bit more, he mentioned that he had not been paid by his newspaper, the major left-leaning daily, in four months. Nor had any of his colleagues at the paper. Yet despite the lack of paychecks, few if any employees had left the paper (which has since filed for bankruptcy), for the good reason that there was nowhere else to go.
Which pretty much sums up Greece. Everyone talks incessantly about the economy — about Merkel and Sarkozy and the E.U., about the tightly knit elite that has run Greece for so long and about their neighbors’ troubles and their own — but somehow everyday life rumbles on, in a collective trance, shot through with gallows humor.
By many indicators, Greece is devolving into something unprecedented in modern Western experience. A quarter of all Greek companies have gone out of business since 2009, and half of all small businesses in the country say they are unable to meet payroll. The suicide rate increased by 40 percent in the first half of 2011. A barter economy has sprung up, as people try to work around a broken financial system. Nearly half the population under 25 is unemployed. Last September, organizers of a government-sponsored seminar on emigrating to Australia, an event that drew 42 people a year earlier, were overwhelmed when 12,000 people signed up. Greek bankers told me that people had taken about one-third of their money out of their accounts; many, it seems, were keeping what savings they had under their beds or buried in their backyards. One banker, part of whose job these days is persuading people to keep their money in the bank, said to me, “Who would trust a Greek bank?”
The situation at the macro level is, if anything, even more transformational. The Chinese have largely taken over Piraeus, Greece’s main port, with an eye to make it a conduit for shipping goods into Europe. Qatar is looking to invest $5 billion in various projects in Greece, including tourism infrastructure. Other, relatively flush Europeans are trying to make “Greece the Florida of Europe,” Theodore Pelagidis, a Greek economist at the University of Piraeus, told me, referring in particular to plans to turn islands into expensive retirement homes for wealthy people from other parts of the continent. Whether or not the country pays its debts, he went on, other nations and foreign companies “now understand the Greek government is powerless, so in the future they will take over viable assets and run parts of the country by themselves.”
For months, Greece has sat at the epicenter of an economic crisis that is threatening the foundations of Europe and that has the potential to bring new waves of economic upset to America. The latest austerity plan meant to satisfy Greece’s creditors and allow for new infusions of financial aid may have averted involuntary default — and a global economic downturn — but will nonetheless make life for ordinary Greeks even more difficult. The plan reduces the minimum wage by more than 20 percent, mandates thousands of layoffs and reduces some pensions, probably ensuring that strikes and demonstrations will continue to be a feature of the Greek landscape.

Next Page »
Russell Shorto is a contributing writer and the director of the John Adams Institute in Amsterdam.
Editor

[Panda]

Feb 13, 9:34 PM EST Greece surveys riot damage after austerity vote By ELENA BECATOROS Associated Press

AP Photo/Petros Giannakouris Business Video Advertisement Buy AP Photo Reprints Photo Gallery Interactives ATHENS, Greece (AP) -- Firefighters doused smoldering buildings and cleanup crews swept rubble from the streets of central Athens on Monday following a night of rioting during which lawmakers approved harsh new austerity measures demanded by bailout creditors to save the nation from bankruptcy. Police said rioters destroyed or damaged more than 110 buildings, of which 50 were burned. They included nine listed as national heritage buildings, mostly in the neoclassical style, while 30 stores were looted. Smoke still rose from the remains of a landmark 1870 building which had housed one of the capital's most loved cinemas, the Attikon, since 1916. About 100 people held a candle-light protest outside the gutted structure late Monday. "Criminals targeted all that was best in the city of Athens, its neoclassical monuments," said Thanassis Davakis, cultural policy chief of the conservative New Democracy party, a coalition government partner. "The damage must be swiftly redressed and the city's memory restored." The stench of tear gas still hung in the air on Monday, choking passers-by, while traffic lights at many major intersections were out after being smashed. The Athens municipality said cleanup crews had gathered an estimated 40 tons of broken marble and rocks from the streets of the center, while railings, drainage covers and paving stones from sidewalks also suffered extensive damage. More than 170 people were hurt in the rioting which also broke out in other Greek cities. Authorities said 109 police needed medical care after being injured by gasoline bombs, rocks and other objects hurled at them, while at least 70 protesters were hospitalized. Police arrested 79 people - including a 14-year-old - and detained a further 92, while in several cases they had to escort fire crews to burning buildings after hooded and masked protesters prevented access, injuring four firefighters. Police also said they were investigating a complaint from a businessman that rioters demanded money to leave his establishment intact. A police statement said the suspects would be charged with offenses ranging from attempted murder and possession of explosives to looting. "(The rioters) intentionally picked traditional buildings to burn," New Democracy leader Antonis Samaras said. "These scum must know that when the time comes I will rip off their hoods." Athens Traders' Association head Panaghis Karellas demanded the dismissal of Public Order Minister Christos Papoutsis, and said afflicted shopowners should receive state compensation. "Once again, those in positions of responsibility, even though they should have been prepared, were unable to fulfill their duty and secure the well-being of citizens and visitors, cultural landmarks and historic buildings, public and private property and our country's international image," the association said in a statement. The ESEE national commerce confederation said most of the badly damaged shops will very likely never open again. "The center of the capital looks as if it has been bombed," an ESEE statement said. The rioting began Sunday afternoon after more than 100,000 protesters marched to the parliament ahead of a vote on drastic austerity measures that include axing one in five civil service jobs over the next three years and slashing the minimum wage by more than a fifth. Lawmakers approved the bill in a 199-74 vote, to the relief of investors who pushed the Athens stock index up 4.7 percent. The vote was crucial for the country to secure euro130 billion ($172 billion) in new rescue loans and avoid a potentially catastrophic default next month - bankruptcy could push Greece out of Europe's euro currency union, drag down other troubled eurozone countries and further roil global markets. The new bailout deal, which has not yet been finalized, will be combined with a massive bond swap deal to write off half the country's privately held debt, reducing Greece's debt load by about euro100 billion. However, it could take time before the country receives any of the cash. For both deals to materialize, Greece has to persuade deeply skeptical creditors it has the will to implement spending cuts and public sector reforms that will end years of fiscal profligacy and tame gaping budget deficits. Eurozone finance ministers meet on Wednesday to discuss the issue, after refusing to approve the plan during a meeting last week, saying Athens had to first approve the new austerity measures. But German Finance Ministry spokeswoman Marianne Kothe said the ministers will not make a final decision on the second aid package Wednesday. She said the bond swap agreement must be finalized first, and the ministers will focus on measures "necessary for the second Greek package." Before signing off on the bailout, the eurozone ministers also want Greek political leaders to commit in writing to uphold the austerity plan even after the general election in April. Government spokesman Pantelis Kapsis said the written guarantees are needed by Wednesday. Although the bill passed the Parliamentary vote, there was strong dissent among the majority Socialists and rival Conservatives who make up Greece's interim coalition government. The Socialists and Conservatives expelled the 22 and 21 lawmakers respectively, reducing their majority in the 300-member parliament from 236 to 193. Germany gave the vote result a cautious welcome, with Foreign Minister Guido Westerwelle describing it as "a first significant step along the right road." "However, the actual difficult work with implementing the reforms that have been agreed on is only just starting now," he said. "That is the decisive precondition for Germany and the other euro partners being able to stand by Greece with a further rescue package." The new austerity comes after two years of deep spending cuts and repeated tax hikes that have sent unemployment soaring to more than 20 percent and left the country struggling through a fifth year of recession. Those measures were taken in return for a first, euro110 billion ($145 billion) package of rescue loans, but despite the cutbacks, Greece repeatedly failed to meet its targets in reducing its debt and deficit and increasing economic competitiveness. ---- Geir Moulson and Juergen Baetz in Berlin and Nicholas Paphitis in Athens contributed to this report.

[Panda]

Blog



AusterityBucharest’s blues


7 February 2012

Romania has become the latest EU country to see its government collapse in the face of planned austerity measures. Isn't it time to think again, asks Jason Walsh.
Following Greece and Italy, both of which have seen governments tumble and be replaced by "technocrat" administrations, Romanian prime minister Emil Boc has quit, saying the move would "defuse political and social tension".
Ireland, Spain and Portugal also saw changes of government, albeit in rather less dramatic circumstances.
In all cases, from Athens to Athlone, one thing remains constant: austerity.
Indeed, Mr. Boc's defence of his government's tax hikes and salary and service cuts could have come from the lips of any of the leaders of the aforementioned countries, either the outgoing bad pennies or their freshly minted replacements.
"I know that I made difficult decisions, but the fruits have begun to appear," said Mr. Boc. "In times of crisis, the government is not in a popularity contest, but is saving the country."
Mr. Boc's words are worth considering for a moment. It is self-evidently true that politics is a popularity contest. That's what it's supposed to be, and anyone who says otherwise is skirting close to anti-democratic sentiments. On the other hand, it is also true that elected politicians must sometimes lead public opinion, rather than merely reflect it. If difficult decisions are required, then they must be taken.
But, really, these are just truisms – and the facts in the case of the various European austerity programmes bear consideration, too.
Without even delving into the details of just why debts are seen as un-negotiable, there is also the small matter that current policies are unable to lift countries out of stagnation. By raising taxes and cutting salaries and jobs (known as "internal devaluation") the hope is to balance budgets, and, in the longer term, gear economies for export. Export need not mean the sale of material goods across borders, and in fact it increasingly means anything but. It may be the hope of growing foreign tourism, it may be the hope of attracting foreign-oriented service jobs such as international call centres, but no matter what is planned, the idea is to draw capital into the economy from abroad.
Which is fine. Except for a few small matters.
First of all, if everyone is attempting to attract massive amounts of foreign investment it rapidly becomes a race to the bottom. Secondly, if everyone is "exporting", who precisely is going to pay to import goods and services?
This is the fatal flaw of austerity: underconsumption, which is well understood on a domestic level, but also applies across the EU.
Plenty of politicians and economists talk about national budgets as being akin to a household budget. This analogy is fine as far as it goes. Who wants to run a deficit and pay vast amounts of interest on loans, after all? But household budgets are not economies. A household is not its own biggest consumer. Depressing spending power results in a drop in consumption which, in turn, leads to slumps in production, thus creating a vicious cycle where economies go into longterm slumps.
Falling domestic consumer demand is far from being the only problem. During times of major economic uncertainty – such as now, for instance – this also works on an international scale, with countries engaged in widespread belt-tightening exercises unable to import foreign goods and services. In addition, businesses facing falling sales or massive debt repayments naturally cut down on capital spending, while outside investment is deterred from the risky business of productive activity, going instead into safer, or simply decadent, markets. In an era – pre-bust – already marked by a decline in longterm capital investment in productive activity, which resulted in an over-relaiance on consumer spending, this risks the creation of markets awash with goods and services no-one can afford.
As real living standards fall across groups of countries, such as say, oh, the European Union, those that rely significantly on external demand such as Germany may soon find that exporting austerity programmes mean they are importing poverty.
Image by Dracula&stuff. CC licenced.

[Panda]

Moody's has downgraded Italy , Spain and Portugal .

France, Britain, and Austria have been warned.

When asked just how important these rating agencies are, an Investment analyst says they are very important because they do the donkeywork of
assessing a Country's debt and Investment Managers rely on them .

Analysts are saying AA has become the AAA and they have already taken account of the ratings in their judgements. the financial problems are World
Wide now and most Countries in recession so their ratings are bound to be affected.

[Panda]

Friday, February 03, 2012










Greece's real challenge







by Katinka Barysch

The German idea of sending Athens a ‘budget commissioner’ was daft.
Berlin itself could not tolerate such interference in its fiscal
sovereignty (the constitutional court would never allow it). But to
restrict such budgetary oversight to Greece alone would be disdainful
and a political non-starter. The idea predictably caused outrage in
Greece. Chancellor Angela Merkel has quietly dropped the proposal but
the underlying problem persists: Greece’s donors – not only Germany but
also other EU governments and the IMF, no longer trust Greek politicians
to turn their country around.

Greece desperately needs a deal on a new bail-out package before March
20th when €14.4 billion in debt repayments are due. The IMF and eurozone
governments insist that new money will only be forthcoming if there is a
realistic prospect of Greek debt becoming sustainable in the
foreseeable future. The IMF says that ‘sustainable’ would mean a debt
level of 120 per cent of GDP by 2020 – although most economists think
that 60-80 per cent is the most that a weak economy like Greece could
cope with.

Even to reduce the debt level to 120 per cent from the current 160 would
require a deep cut in existing debt, more fiscal austerity, lots of
further outside help and a return to economic growth. Media attention
has focused on the debt restructuring talks between Athens and it
private creditors. But for Greece’s future prospects, the question of
whether bond holders get 3.8 per cent or 4 per cent interest on their
restructured portfolios is insignificant compared with the much bigger
question of whether and when Greece emerges from its devastating
recession.

There is now broad agreement among eurozone donors and the IMF that
Greece will not be able to squeeze more revenue out of an economy that
is in its fourth year of recession. The IMF forecasts GDP to fall by a
further 3 per cent this year but private sector forecasters, such as the
Economist Intelligence Unit, think that the economy may contract at
twice this rate. In 2010, Greece went through the most savage austerity
programme ever implemented by an OECD country. Yet the budget deficit at
the end of 2011 stood at around 10 per cent of GDP, so adding to the
already unsustainable level of debt.

The emphasis of Greece’s negotiations with the troika (IMF, ECB and
European Commission) has shifted to structural reforms designed to boost
growth. The good news is that there is lots of room for improvement: by
many measures, Greece is the EU’s least efficient economy. The National
Bank of Greece has calculated that a comprehensive reform package could
boost the annual growth rate by 1.5 per cent over the medium term,
although the OCED thinks an additional 0.5 per cent is more realistic.

The previous government of George Papandreou started making headway in
various areas, for example by removing some of the protection enjoyed by
truckers, lawyers, pharmacists and 140 other ‘closed shop professions’,
by simplifying licensing procedures, making life easier for small
businesses or giving workers and their bosses more wiggle room to set
pay and conditions in Greece’s over-regulated and union-dominated labour
market. Papandreou’s technocrat successor, Lukas Papademos, has
continued along those lines.

The bad news is that most of these reforms so far only exist on paper –
and even here they are often timid and riddled with loopholes. In many
cases, the biggest obstacle to real progress is Greece’s bloated and
inefficient state administration. According to an OECD analysis
published in December, the central government is simply not capable of
designing and implementing the growth-boosting reforms that Greece so
desperately needs.

The ILO counts 390,000 civil servants in Greece. But add the 660,000
working for public corporations and other semi-state entities and the
number swells to over 1 million – more than one-fifth of the workforce.
Even that number may be too low since there are all manner of
quasi-civil servants on outsourced or temporary contracts who enjoy
similar pay levels and perks as full civil servants.

For many years, public sector salaries had outstripped those in the
private sector; before the crisis they were on average 60-70 per cent
higher. Public sector workers also enjoyed plenty of extra benefits, in
addition to job security. Since the onset of the crisis, labour costs in
the public administration, defence and social security have fallen by
about 6 per cent, according to Greece's National Institute of Labour. In
some parts of the private economy, such as hotels and restaurants,
labour costs have fallen by 30 per cent. And unemployment has
predominantly hit the private sector, too. “The real conflict is not
between Greece and its donors. It is between the public sector and the
rest of the population”, says one Athens think-tanker.

The troika demanded early on that Greece shrink the public sector by
only replacing one of five of those retiring. But between early 2010 and
mid-2011, the government added 20,000 people to the public sector
payroll (which still amounts to 13 per cent of GDP). Now the troika
insists that the government get serious about cutting the headcount by
up to 150,000 over the next three years.

The December OECD report found that the main problem with Greece's state
administration was not its size but the fact that it adds too little
value. There is little sensible policy-making because ministerial
bureaucracies do not collect or use data on which to base their policy
designs. Moreover, ministries communicate badly with each other, if at
all. And even within ministries most departments work in “silos” – they
produce rules and regulations without much of an idea how they fit into
any broader policy plans. The average Greek ministry has 440 different
departments or administrative units. One in five of these do not have
any staff other than the head of department and only one in ten have 20
staff or more. The central government alone is spread over 1,500
different buildings.

The OECD also found that civil servants care little if new rules and
policies are implemented, monitored and enforced. The result is a state
administration that is top-heavy, inflexible, obsessed with process and
is basically busy having “a conversation with itself”, as the OECD puts
it. Having watched the government’s laboured efforts to improve matters,
the OECD now thinks that only a “big bang” reform could give Greece a
public administration capable of planning and implementing meaningful
change.

Similarly, a white paper that came out of a brainstorming at London
Business School last year suggests that in some government areas a
completely new start is needed. The most urgent is probably the tax
administration. The authors of the white paper (Michael Jacobides ,
Richard Portes and Dimitri Vayanos) are sceptical whether the cronyism
and corruption that pervades local tax offices can ever be tackled.
Although the government has told its tax collectors to get tough on
evaders (some €60 billion in taxes are outstanding), many have simply
failed to heed orders to, for example, conduct audits on big tax
debtors. Even former finance ministry officials admit that Greece would
probably be better off to abolish the 300 local tax offices because they
cost more than they collect. Instead, Greece should set up an
independent central tax and social security collection agency.

The white paper suggests similar independent bodies in other areas:
buying medicines and equipment for the healthcare sector (here, Greece’s
spending per head has been the highest in Europe for many years);
public procurement more generally (public contracts amount to 11 per
cent of GDP but it takes on average 230 days to award such a contract); a
corruption watchdog (although graft appears to be declining, according
to Transparency International, one in ten Greeks said they paid a bribe
in 2010, with public hospitals and tax inspectors being the most
greedy); and a central steering group to supervise structural reform – a
proposal also dear to the OECD’s experts.

Such independent bodies could potentially be established quickly and
make a noticeable difference. However, the few new bodies that the
government has so far set up, such as the privatisation agency and the
parliamentary budget office, have been woefully understaffed. And they
have encountered much political resistance when trying to carry out
their assigned tasks.

Greece’s donors know that there are no quick fixes for the country’s
deep-seated malaise. But they no longer trust the political class to
carry out a sustained reform programme. Both big parties, Papandreou’s
social-democrats (Pasok) and the conservative New Democracy, draw much
of their support from public sector workers and other molly-coddled
groups that resist change.

The new ‘technocrat’ government will hardly make a difference: Papademos
has been given only five months before the next election is due. And
unlike Mario Monti in Italy, who was free to fill ministerial posts with
experts and other non-political types, Papademos is lumbered with 45
cabinet ministers, most of whom are career politicians from Pasok and
New Democracy.

EU politicians now insist that all party leaders must commit to the new
troika reform programme beyond the April election. But both Pasok leader
Papandreou and New Democracy’s Antonis Samaras are opposing chunks of
the troika programme while suggesting that there is an easier way out of
the crisis than radical reform.

The negotiations for the new support programme are a good opportunity
for a new deal: the troika eases demands for rapid fiscal consolidation
and finds additional money for growth-boosting investments, for example
from Greece’s €15 billion unspent EU funds or the EIB; Greek political
leaders, in turn, get serious about public sector reform and opening up
the economy. Ultimately, only the Greek people – not any kind of outside
watchdog – can hold the country’s often self-serving politicians to
account. To help the Greek people, Greece’s donors must make a bigger
effort to improve their image in Greece and explain to the Greeks what
needs to be done to put the country on a sustainable growth path.

Katinka Barysch is deputy director of the Centre for European Reform.




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Portugal

Patient is still fragile





14 February 2012

Expresso
Lisbon








Cristina Sampaio






With its political consensus, labour agreements and
reforms in progress, Portugal appears to be better off than Greece. But
the threat of bankruptcy remains and a fresh turn of the screw is still
possible, warns Expresso.





In Portugal, anyone who has watched the footage of pitched
battles between demonstrators and police in Syntagma Square and heard
the reports of political party disputes over the latest austerity
package will have no trouble distinguishing between the respective
situations of the two countries.

In Portugal, we have a political consensus backed by 80% of MPs, and
a social agreement [between political parties and unions] on the
implementation of labour market reforms demanded by the troika [the
European Commission, European Central Bank, and the IMF], which include
more flexible rules on individual lay-offs.

The government and its social partners have reached agreement on
plans to reduce the number of public holidays and leave days.
Unemployment benefit has been cut. The law on rents has been changed
[to facilitate the eviction of non-paying tenants and put an end to
rent ceilings], while the government stake in Energias de Portugal
(EDP) and Rede Eléctrica Nacional (REN) has been sold to Chinese funds.
And all of this (and more) has been done without agitation or trouble,
and certainly without any violence.

For all these reasons, Portugal is clearly not Greece, but these
reasons have not been enough to convince everyone of this fact. In
particular, doubts have been expressed about Portugal’s ability to
obtain renewed funding from the markets in 2013. The conversation
between the German and Portuguese finance ministers recorded by an
indiscreet TVI camera is most edifying on this topic: Wolfgang Schäuble
himself alludes to a possible readjustment of Portugal’s bailout and
informs his opposite number that Germany would be in favour of such a
move. Remarkably, this indiscretion was enough to calm the markets and
reduce the rates of interest on Portuguese sovereign debt.

But let there be no illusions. The idea, which is increasingly
gaining ground, that everything will work out fine is inherently
dangerous, because a lot will depend on numerous factors over which we
have no control. For example, we may have to contend with the collapse
of Greece and its exit from the euro, or a European recession that
proves to be more severe than expected.

There is no doubt that if the state which was the cradle of Western
democracy collapses, the European Union will need another example to
demonstrate the efficiency of the austerity polices defended by the
troika: and Portugal could be this example. But we should expect that
our partners will demand further sacrifices before they provide further
aid.

And there is very little mystery about the nature of these
sacrifices, which are immediately apparent in the ten commandments the
troika asked the Greek political parties to sign. There you can see
that we have not yet been asked to reduce the minimum wage (which is
lower than the one in Greece, 485 euros as opposed to 750 euros), to
get rid of 13th and 14th month payments in the private sector, to cut
back on paid holidays, or to push through public sector lay-offs.

At the same time, the obsessional drive to reduce the Taxa social
única [worker and employer social security contribution] has yet to
bear fruit. That the markets are acknowledging that there is a
difference between Portugal and Greece is excellent news, but it also
implies that we may have to face our own road to Damascus before we are
out of danger: and the road to Damascus is often a long one.












Debt crisis
Only one small step from Lisbon to Athens





Representatives of the troika of Portugal’s creditors (the
European Commission, the European Central Bank and International
Monetary Fund) are to arrive in Lisbon on 15 February. Their mission is
to assess for the third time how reforms demanded in return for the
€78 billion loan granted in May 2011 are being implemented. The payment
of a new tranche of €14.9 billion (€40 billion has already been paid)
depends on the troika’s report card.

Portugal’s leaders, starting with Prime Minister Pedro Passos
Coelho, have repeatedly stated that “Portugal is not Greece” and that
the country will respect its commitments, reports the director of Expresso, Ricardo Costa.
To avoid the comparison, Passos has announced his plans to go “beyond
the troika” and speed up structural reforms. It’s a dangerous strategy,
the Lisbon weekly notes, as it will be -

“... difficult to obtain a broad political consensus when a new aid
package has to be negotiated. [...] Lack of consensus could lead
Portugal into a “Greek” situation, when the troika comes to negotiate
an extension of the aid plan with political parties. Last year’s
consensus exists only on paper today. From this misunderstanding to
Greece there is only one step. A very small step.”

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Breaking News :- After telephone calls this afternoon, the meeting tomorrow of the Troika has been cancelled because Greece is now saying it cannot
guarantee that the measures adopted now will be honoured by Parliament after the election. .





14 February 2012
Last updated at 18:35












Eurozone leaders 'call off Greece crisis talks'












The 17 finance ministers of the eurozone nations had been due to meet in Brussels on Wednesday
















Global Economy














The
head of the eurozone countries has downgraded an eurozone finance
ministers meeting on Wednesday, saying Greece has not yet given the
necessary assurances about its austerity plan.

Ministers, who had demanded Greece find an extra 325m euros of savings, had been set to meet in Brussels.

But Eurogroup President Jean-Claude Juncker said the talks would be replaced by a conference call.

He said technical work with Greece was still needed "in a number of areas".

Finance ministers had not received assurances from leaders of
Greek political parties on a programme of proposed cuts, Mr Juncker was
quoted as saying by Reuters news agency.

He said that "against this background, I have decided to
convene ministers to a conference call tomorrow in order to discuss the
outstanding issues".

As well as 17 ministers from nations that use the euro, the
president of the European Central Bank Mario Draghi and the Commissioner
for Economic and Monetary Affairs, Olli Rehn, had also been due to
attend the meeting.

Mark Lowen, the BBC's Athens correspondent, says the Greek
Prime Minister's office confirmed that the face-to-face meeting had been
called off.

'Harsh'
The latest 130bn-euro bailout ($169.5bn, £108.7bn) was agreed
in principle by EU leaders in October, conditional on Greece adopting
further measures to cut its deficit and restructure its economy.

On Sunday, Greek MPs approved extra cutbacks, but parties had to expel more than 40 deputies for failing to back the bill.





Thousands protested against the latest round of Greek austerity measures

Thousands protested in Athens, where there were widespread
clashes and buildings were set on fire. Violent protests were reported
in cities across the country.

"As time has gone on more and more people believe that
austerity measures can't be met because the economy is doing too badly
and that they are far too harsh especially for the working and middle
classes in the private sector." said Nick Malkoutzis, Deputy Editor, of
Kathimerini English Edition.

"The feeling is they are being made to pay for failure to reform the public sector." he said.

There is pressure on Greece to make progress, as the country
will not be able to pay debts due on 20 March unless it can qualify for
more bailout funds by satisfying its European partners.

By that date Greece needs to repay 14.5bn euros to lenders.

'Hard line'
When and if eurozone ministers are convinced Greece is making
progress on cuts, and if the German parliament agrees to the bailout (as
it must under national law), then any new bailout could be signed off
in early March.

But there have been warnings that politicians in Germany, Europe's biggest economy, may be losing patience.

"Given the increasing hard line we have seen out of German
policymakers over the past few days, you would wonder if Germany is
trying to push Greece out [of the euro]," Michael Hewison of CMC Markets
told the BBC.

Meanwhile, an official report on Tuesday showed that the
decline of the Greek economy accelerated in the final three months of
2011.

The estimate showed that, compared with a year earlier, Greek GDP contracted by 7% in the fourth quarter of 2011.

That is an acceleration from the 5% contraction in the third quarter.

The report also shows that the Greek economy shrank 6% last
year, an increase on earlier estimates and the fifth year of recession.

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he Economic Consequences of Greece

• 
  
  
  
  
  
  

Ed Conway

February 13, 2012 10:52 AM

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  Recommend post (4)
  

History, said Karl Marx, repeats itself twice, “the first time as
tragedy, the second time as farce”. Bad economic policy, on the other
hand, repeats itself forever – but the results are rarely funny.
Take Brussels’ current economic plans for Greece.
They
are, in economic terms at least, akin to the Versailles Treaty of 1919.
Germany (whose politicians have lobbied hardest for this type of deal)
is attempting to impose the kind of austerity (and relative lack of debt
forgiveness) that was imposed on it after the First World War – the
reparations policy which contributed to the rise of Hitler and WWII*.
As John Maynard Keynes, who worked for the Britain delegation to Versailles, prophesied in his breakthrough work, The Economic Consequences of The Peace,
the upshot was economic chaos, social unrest and, ultimately the rise
of extremist politics in Germany, with hideous consequences.
But despite this lesson, as Ambrose Evans-Pritchard writes in the Daily Telegraph this morning,
the latest set of austerity measures imposed on Greece are equally
onerous. With Greece in its current spiral, every extra euro cut from
public budgets further diminishes the country’s economic capacity to
recover, and pay its way back out of debt.
Default is now
inevitable – the only question is whether it’s a messy, unplanned one;
and whether, under those circumstances, Greece could stay in the euro.
Why
then, bearing all of this in mind, are the Germans still persisting
with such disastrous policies? It can’t be due to economic ignorance: a
country with its history knows better than most of us the implications
of consigning a country to an economic agreement it has no reasonable
hope of fulfilling. Which leaves us with three possibilities:
1.
It is trying to make an example of Greece. Brussels is terrified of the
so-called moral hazard that would ensue if it was seen as providing the
country with bail-out cash without securing a guarantee that it wouldn’t
misbehave again.
2. It doesn’t really expect the country to meet the bail-out conditions.
3. It wants Greece to leave the euro.
In
fact, the answer is likely to be a combination of all three. But
perhaps the most important is the final one. At present, there is still
broad-based support for euro membership among the Greek people. As long
as that perseveres, Brussels cannot reasonably eject the country from
the euro area – both in that there are no legal levers allowing it to do
so and that it would look politically appalling both within and outside
Europe.
The best rational explanation for the extreme austerity
policies Germany is inflicting on Greece is that it wants Greek support
for remaining within the euro to plummet and for the country to decide
to leave the single currency of its own accord. By imposing
ever-more-impossible conditions on each successive bail-out,
Germany/Brussels will eventually make euro life so intolerable for
Greece that it will have little option but to pull the escape cord.
Greece’s departure could then be posited by Brussels as an example of what happens to those who flout its rules.
Which
begs two immediate questions: (1) Does this leave Greece better off,
and (2) will the rest of the euro be able to survive? Briefly:
1.
Greece should be better off in the long-run, since it will be able to
devalue its currency and finally improve its competitiveness. But
leaving the euro will effectively exile it from capital markets for some
months, if not years. At present, Greece is nursing a primary deficit,
meaning that even if you ignored its existing interest servicing costs
on its debt, it would still have to borrow to pay for its public sector.
So there is no point in it leaving the euro (and defaulting or
devaluing its debt) until later on in the year, when it moves back into
primary surplus. Even then, the associated economic chaos of a euro
departure would wreak chaos on domestic politics.
2. In theory,
the European Central Bank and European Financial Stability Facility have
created enough of a firewall to prevent Europe’s financial system from
imploding in the event of a Greek departure, or messy default. However,
as the collapse of investment bank Lehman Brothers showed in 2008, there
is really no knowing how the financial system will react in an event of
such significance. Moreover, the real risk is that other periphery
countries, such as Portugal and Ireland, look at what happened to Greece
and ask whether it might be worth their while leaving as well. And what
about Italy? At the very least, investors will ask similar questions,
which could trigger a big sell-off in government bond markets.
Whatever
your expectations, the truth is that as every day passes, the
likelihood of Greece leaving the euro looks more and more likely. So
while the Greek parliament’s decision to pass the latest austerity plans
may calm the European economy for a short while, don’t expect that to
last.
* If we're being strictly accurate, the current plan is
rather more similar to the Young Plan of 1929, which modified the
original Versailles Treaty and Dawes Plan, reducing the total debt
Germany owed. After all, last July's revised bail-out package included a
50% reduction in private sector holdings of Greek debt. But by most
economic measures, this still isn't enough to allow Greece to grow out
of its current hole.

[Badboy]

I AM BEGINNING TO WONDER IF GREECE CAN PULL OUT OF ITS DEATH SPIRAL.
I READ IN ONE PLACE(COMMENTS ON ONE ARTICLE)SOMEONE SUGGESTED PUTTING SENOIR POLITICANS ON TRIAL FOR TREASON,PERHAPS AFTER A COUP BY POLICE AND/OR ARMY.

[Panda]

I AM BEGINNING TO WONDER IF GREECE CAN PULL OUT OF ITS DEATH SPIRAL.
I READ IN ONE PLACE(COMMENTS ON ONE ARTICLE)SOMEONE SUGGESTED PUTTING SENOIR POLITICANS ON TRIAL FOR TREASON,PERHAPS AFTER A COUP BY POLICE AND/OR ARMY.

Badboy, the Troika is making it as difficult as it can because they know Greece will not adopt the austerity rules for long and what Country with any
Pride would tolerate such stringent rules on how its Parliament behaves. After all the rioting and destruction of buildings , strikes etc the Population
has shown it's disgust and I think default is inevitable.

I blame the Troika for the way they have handled this, Merkel in particular.

[Panda]

• 
  

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◄►

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Greece: Cash Lifeline Meeting Cancelled








11:19pm UK, Tuesday February 14, 2012

Robert Nisbet, Europe correspondent

Finance ministers from across Europe have cancelled a meeting to discuss a
cash lifeline for Greece because they say the country has still not done enough
to spring the money.


At the weekend Greek MPs passed a new austerity package, putting into law
deep job and spending cuts, as rioters set buildings alight and tens of
thousands of protesters thronged the streets.

Prime Minister Lucas Papademos told voters the package
had been demanded by international creditors in order to secure another 130bn
euro bailout, and that failure to pass it would lead to "catastrophe" for
Greece.

:: Read more about the eurozone crisis at our dedicated topic



Do you know your EFSF from your ESM? Read our
full explainer.



But it appears the austerity measures still do not go far enough to satisfy
those holding the purse strings.

Prime Minister of Luxembourg Jean-Claude
Juncker, who heads the Eurogroup, says information was still missing as
to how Greece plans to cut another 325m euros, a budget hole left when
politicians in Greece refused to cut pensions even further.

He also said Greek political leaders failed to supply written assurances they
would implement the austerity drive even after elections this spring.

There are also reports that even those key conditions may not be enough.

The so-called Troika of lenders - the International Monetary Fund, the European Central Bank and the European Commission - want more so-called 'prior actions'
before they will agree to give the money, according to a series of demands
leaked to the Associated Press.



Greece's latest austerity measures have sparked
riots


In the document seen by the news agency, more specific action is detailed,
including shaving 1bn euros from pharmaceutical spending, 300m from the defence
budget and other savings totalling 1bn.

The details are contained in a 'Memorandum of Understanding' which will now
be discussed by the eurozone finance ministers in a teleconference on Wednesday
and at the next scheduled meeting of the Eurogroup on Monday.

Some of the savings are likely to have already been included in the austerity
package, but the 16 other euro countries will still want to ensure the package
will be fully implemented.

Speaking on Jeff Randall Live, Notis Mitarachi, head of economic policy for
Greece's opposition New Democracy Party, said: "We're talking about 0.1% of GDP
missing. I think there are enough proposals on the table. I'm certain that (the
issue) can be solved and will be solved quickly.

"I'm certain that there will be a positive outcome very soon.

"I'm a member of the opposition and I am aware that we have enough proposals
on the table with specific cost cuts and they should resolve the requests of the
eurogroup.

"We are working on a direction and we are fully committed to the success of
this programme. That is the key message that people should take home."

Greece is running out of time to get its hands on the bailout.

On March 20, it has to pay back creditors 14.4bn euro in a massive bond
redemption, but it will not be able to do so without a bailout.

Failure to pay could lead to a so-called disorderly default, which would
likely see Greece forced to abandon the single currency.

Another piece of the jigsaw still has to fall into place: a deal with private
bondholders to write down a large slice of the country's 300bn euro debt
mountain.

It was expected banking negotiators were likely to make an announcement on
Wednesday evening that those talks had been successfully concluded, but that may
also now be delayed.

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News Analysis

Portugal’s Debt Efforts May Be a Warning for Greece



Mario Proenca/Bloomberg NewsThe Portuguese public so far has generally gone along with the government’s policies, but it is starting to lose patience. Above, a protest against austerity measures last week in Lisbon.
By LANDON THOMAS Jr.

Published: February 14, 2012

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LISBON — As debt-plagued Greece struggles to meet Europe’s strict terms for receiving its next round of bailout money, the lesson of Portugal might bear watching.


Multimedia




MapDebt Rising in Europe




Interactive FeatureTracking Europe's Debt Crisis



Related

• Athens Shaken by Riots After Vote for Austerity(February 14, 2012)
  

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Room for Debate


What Went Wrong in Portugal?

Portugal swiftly curbed its budget when it accepted international aid, but now the nation is struggling to pay its debts.

The New York Times




Unlike Greece, Portugal is a debtor nation that has done everything that the European Union and the International Monetary Fund have asked it to, in exchange for the 78 billion euro (about $103 billion) bailout Lisbon received last May.
And yet, by the broadest measure of a country’s ability to repay its debts, Portugal is going deeper into the hole.
The ratio of Portugal’s debt to its overall economy, or gross domestic product, was 107 percent when it received the bailout. But the ratio has grown since then, and by next year is expected to reach 118 percent.
That’s not necessarily because Portugal’s overall debt is growing, but because its economy is shrinking. And economists say the same vicious circle could be taking hold elsewhere in Europe.
Two other closely watched countries on the debt list, Spain and Italy, also have rising debt-to-G.D.P. ratios — even though they, like Portugal, have adopted the budget-slashing and tax-raising measures that the European officials and the I.M.F. continue to prescribe.
And on Tuesday, new figures showed that the Greek economy shrank even more than expected last year, as Greece struggles under ever heavier austerity demands by its European lenders.
Without growth, reducing debt levels becomes nearly impossible. It is akin to trying to pay down a large credit card balance after taking a pay cut. You can slash expenses, but with lower earnings it is hard to set aside money to pay off debt.
Vitor Gaspar, the Portuguese finance minister who came to power as part of a new government last summer, is highly regarded by European economic and finance officials. He has reduced the government’s budget deficit by more than one-third so far, through tough measures that include cuts in spending and wages, pension rollbacks and tax increases.
But many economists say those moves are also a reason Portugal’s economy shrank by 1.5 percent in 2011 and is expected to contract by 3 percent this year.
“Portugal’s debt is just not sustainable,” said David Bencek, an analyst at the Kiel Institute for the World Economy, a research organization in Germany. “The real economy does not have the structure to grow in the future and thus will not be able to pay back its debt in the long run.”
The Portuguese public has so far has generally gone along with the government’s policies without the violent demonstrations that have rocked Greece, but it is starting to lose patience.
On Saturday, more than 100,000 people assembled peacefully in Lisbon’s sprawling Palace Square to rally against the austerity measures and the nation’s 13 percent unemployment, while chanting “I.M.F. doesn’t call the shots here!” The head of Portugal’s largest labor union vowed to hold additional protest rallies around the country.
The I.M.F., for its part, predicts that Portugal will eventually grow enough to cut its debt to a manageable level. But even the I.M.F. warns in its recent economic review that if growth were to disappoint, Portugal’s debt “would not be sustainable.”
The finance minister, Mr. Gaspar, an economist who is a former research director at the European Central Bank and a disciple of the bank’s austerity-focused philosophy, insists that his country’s debt is manageable. And he has no plans to ease up. This year he intends to slash government pension payments by 1.2 billion euros (close to $1.6 billion) and cut the bonus payouts that public sector workers in this country have long earned.
In discussing his record, Mr. Gaspar prefers to focus on the effect his efforts have had on Portugal’s budget deficit — the difference between what it spends and what it takes in — which has fallen to 5.6 percent last year, from 9.1 percent in 2010. For this year, Mr. Gaspar forecasts a decline to 4.5 percent.
“We have delivered, and our adjustment program stands out in the euro area,” he said during an interview on Friday in the ornate surroundings of the finance ministry here.
Once Portugal’s budget reforms take hold, Mr. Gaspar predicts, the country’s economy will grow by more than 2 percent from 2014 on, and the debt will fall accordingly.
Mr. Gaspar has won plaudits from Europe’s leadership and the I.M.F., which are eager to champion an exemplar of economic revamping in contrast to Greece’s unspooling disaster. In fact, Portugal is deemed such a model of reform that the Europe Union and I.M.F. are widely expected to come up with more money for Portugal next year if necessary — as was suggested in an overheard exchange between Mr. Gaspar and the German finance minister at a meeting last week in Brussels

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Greece Expected to Offer Debt Holders a Deal Soon

By LANDON THOMAS Jr.

Published: February 14, 2012

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When the Greek government presents its debt relief proposal to bondholders in the next week, it could lead to one of the largest debt restructurings in history.




Enlarge This ImageJock Fistick/Bloomberg News

Jean-Claude Juncker, the head of the Eurogroup.

Related in Opinion

• Op-Ed Contributor: Europe v. World(February 15, 2012)
  

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What Went Wrong in Portugal?

Portugal swiftly curbed its budget when it accepted international aid, but now the nation is struggling to pay its debts.

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It could also be the last one for a while, if European leaders have their way.
European officials want Greece to be seen as a special case, to assure global investors and lenders that other weak economies in the euro currency union will not eventually need their own debt write-downs. Otherwise, officials worry that fears of other debt renegotiations will prolong the sense of uncertainty and crisis that has plagued the euro zone financial system for nearly three years.
If the majority of the Greek government’s private creditors accept the deal, 100 billion euros of debt (about $132 billion) will be struck from Athens’s pile of i.o.u.’s, which now total more than one and a half times the size of the Greek economy.
But if a large enough faction spurns the offer — a debt swap that would result in a nearly 70 percent loss for investors — the deal will fall apart.
That would jeopardize the 130 billion-euro bailout Athens hopes to receive from the European Union and the International Monetary Fund. And it would raise the prospect of default by Greece and could prompt its exit from the euro union — a departure whose regional consequences are hard to predict.
Euro zone finance ministers on Tuesday turned up the pressure on Greece to keep its budgetary promises, canceling a planned Wednesday meeting in Brussels and deciding instead to convene by teleconference.
Jean-Claude Juncker of Luxembourg, the chairman of the Eurogroup of euro zone finance ministers, said on Tuesday that the conference’s format had been changed because he was still waiting for assurances from Greek leaders about enacting budget cuts and other promised measures. Other technical work remains to be done before the next bailout can be released, Mr. Juncker said.
One unresolved issue is how the European Central Bank plans to handle its holdings of 55 billion euros in Greek bonds.
The working assumption is that the European bank, or possibly individual national central banks within the euro zone, might contribute to Greece’s debt relief by exchanging their current Greek bonds for new ones. Under that swap, the central bank or banks would forgo bond profits, but would not have any actual losses.
Complicating all this is the latest grim news on the Greek economy, which plunged 7 percent in the fourth quarter, according to data released Tuesday. That meant Greece’s economy shrank by 6.8 percent in 2011 — worse than the government’s previous estimate of 6 percent.
The new data is the latest sign that Greece may not be able to grow fast enough to pay down its debt, raising fears that even the latest terms won from investors will not be sufficient for its long-term recovery.
The final offer to Greece’s private creditors is expected to be a swap for bonds that have an interest rate of around 3.5 percent — down from the 4 percent or higher rate that investors originally demanded. Those bonds are expected to carry a “cash component” that actually would no longer be pure cash but, instead, involve less attractive short-term bonds issued by Europe’s bailout fund.
Through gritted teeth, most private creditors have said they are inclined to accept the offer.
They have little choice. Greece’s threat to attach so-called collective action clauses to the bonds they currently hold would force all investors to take a loss. Any holdouts on the deal would be stuck with nearly worthless bonds that offered no protection if Greece eventually needed to restructure its debt yet again.
“I think if there are no more changes, 75 to 80 percent of investors will participate,” said Hans Humes, president of Greylock Capital in New York, who is a member of the steering committee of the Institute of International Finance, the banking group that is representing bondholders in the talks.
But Mr. Humes warned that the number of potential holdouts had increased in the last few weeks, a response to the seeming take-it-or-leave-it attitude of the European leaders involved in the negotiations.
He also noted that he had been receiving calls from lawyers and bankers urging him to move from the conciliatory camp to the objecting group and fight the matter in court. He said he had declined those entreaties, on the grounds that such a strategy would be fruitless. But others, he said, might still be open to a legal fight.
“If you go too far on the coupon and fiddle too much with the cash component, it just won’t work,” he said. “The discontent on our side is growing.”

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15 February 2012
Last updated at 07:24











German economy shrinks 0.2% in fourth quarter












Germany's economy had its first negative quarter since 2009

The German economy shrank 0.2% in the final three months of last year.

Germany saw exports slow down as the debt crisis hit its European neighbours and their demand for German goods.

In France there was surprise growth at the end of last year, with the economy expanding by 0.2% in the fourth quarter.

The economy was boosted by healthy growth in exports and
business investment, which will come as a boost to President Nicolas
Sarkozy.

If he chooses to run again, Mr Sarkozy faces a national election in April.

Confidence in France was undermined in January when it lost
its top-notch AAA credit rating, after Standard and Poor's downgraded
the nation's debt.

At the time the agency blamed Europe's debt crisis and the failure of Europe's leaders to tackle the region's problems.

For 2011 as whole, the French economy grew by 1.7%.

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Italy is now in a double dip recession and joins Belgium , Austria is struggling, Germany GDP -2%, France +1%.

Youth unemployment around Europe:-
Germany 8%, Spain 31%, France 23%, Italy 24% UK 22% U.S.A. 23%

Sarkozy is going to fight the General Election in France on his handling of the Euro crisis.

Saxo Bank CEO says Greece will default but the EU can make it orderly and give Greece a chance to start trading with the Drachma. He also says that
Greece should never have been allowed to join the Euro and the EU should hold off on future Countries joining until the EU has complete fiscal and
political unity because that is the only way it can survive.

The yield on the 2 yr Greek Bond is 22% ......how on earth can this be repaid?

Italy is in recession and it's growth built on credit . Italy is very wealthy , even more than Germany and should avoid contagion.

Germany has not had a very good growth record over the past 10 years , relying on it's Engineering skills and importing little. The U.S.A. and U.K. have
outpaced Germany.

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China has pledged to help with the Euro crisis (conditional upon it has more access to EU markets no doubt.!!!)

An Italian Radio24 Station is highlighting the youth unemployment and says more and more youngsters are leaving the Country to try to find work. The
station is campaigning for more flexibility from employers who tend to take on Staff who are known to them.

It is thought by Investors that Greece is caught between a rock and a hardplace.. If Parliament gives written Guarantees to Troika it risks more riots
from the Population. Troika know full well that they are squeezing all they can and secretly want Greece to default. Reporters in Greece are saying
that the Citizens are outraged that the EU want a Member of their finance dept. to monitor the spending and balance of books and taking away the
ability of the Greek Government to govern itself.

Stock exchanges around the World are fed up with Europe and the way the EURO Crisis has been handled , clearly there was no provision in it's charter
for such an event. It also highlights the need for a Eurobond which Germany is opposed to . Because of 17 Countries having to meet for decision making
and every Country having a different fiscal policy, if not with Greece, the chances are another Country will default.

[frencheuropean]

The guardian


News
World news
François Hollande




François Hollande seeks to reassure UK and City of London

French presidential frontrunner says he wants UK back in heart of Europe and finance sector need not fear new regulation

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Angelique Chrisafis in Paris

guardian.co.uk, Monday 13 February 2012 18.57 GMT
Article history



Socialist presidential candidate for 2012 François Hollande at an election rally. Photograph: Corbis


François Hollande, the Socialist favourite to become the next president of France, said he wants to woo Britain back into the heart of Europe and sought to reassure the City of London it should not fear his drive for more regulation of the financial world.

"We need Britain to feel part of Europe," Hollande told British correspondents ahead of a high-profile visit to London next week. But he added that France could never have accepted David Cameron's attempt to create a "sanctuary" from financial regulation for the City of London in the new European treaty.

Hollande brushed aside the fears of the political right in London that he would be dangerous for the City. He said he was not "aggressive", nor seen in France as very leftwing, and his drive to regulate finance was no more than Barack Obama's keynote speech to Congress. "You could say Obama and I have the same advisers." He said his stance on further regulation for the financial sector was in line with "public opinion" in Europe and was similar to all other French presidential contenders, including the rightwing Nicolas Sarkozy.

Hollande, a jovial, consensus-building rural MP who led the Socialist party for 11 years, is forecast to win the French presidential election in May. When at a recent rally, he named the "world of finance" as his main "adversary", it was an example of the broad, anti-banker campaign-rhetoric of all French presidential candidates, including those on the right. His manifesto increases taxes on the very rich, who have largely escaped much of the French tax burden. But he is seen as a centre-left, moderate Social Democrat whose hands are tied by France's debt crisis and the gaping hole in state finances. His project is the most muted of any Socialist candidate before him and contains none of the traditional leftwing promises to raise the minimum wage or salaries, but undertakes to rein in the public deficit. His most concrete measure on banks – a law to separate their loan-making business from their "speculative operations" – are already under consideration in the UK and the US, and Sarkozy has trumped Hollande by announcing a financial transaction tax for France, the so-called Tobin tax or Robin Hood tax.

But Hollande's lavish praise of Tony Blair was revealing about his own political orientation and his potential style of running France. For years, Blair, New Labour and the third way were heresy to most French Socialists. Hollande said Blair was pleasant "and so intelligent he didn't need to be arrogant". He added: "The first lesson to take from Blair is how long he lasted ... Second, he was able, after a long period of Thatcherism, to reinstate education, health and the public sector ... Then he succumbed to the dominant idea that the markets could regulate themselves and the notion that the markets and [economic] liberalism in themselves could be a factor for growth ... We saw the consequences."

Hollande brushed aside suggestions that he was a leftwing ideologue and dismissed comparisons with the initial fear greeting François Mitterrand's election in 1981. "The 1980s was a different era. People said there would be Soviet tanks on the Place de La Concorde. That era is over, it's history. It's normal there were fears then. There had been 23 years of the right in power, the cold war was on and Mitterrand nominated Communist ministers to government. Today there are no Communists in France. Or not many ... the left was in government for 15 years in which we liberalised the economy and opened up the markets to finance and privatisations. There is no big fear."

He reiterated his long-standing demand for change to the European treaty on economic integration, but appeared to temper a call for total renegotiation, stressing he wanted to add a clause about economic growth, either inside or outside the treaty. He said it would be for the French parliament to ratify the treaty after the election and he would not put it to a referendum.

Unlike Sarkozy, Hollande said he speaks English "like a Frenchman, with an accent, but I speak it". He said he knew Britain and had "no apprehensions or prejudices" about it.

• This article was amended on 14 February 2012 to insert part of a missing quote.

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This is the part that bothers me frenchperson.


But Hollande's lavish praise of Tony Blair was revealing about his
own political orientation and his potential style of running France. For
years, Blair, New Labour and the third way were heresy to most French
Socialists. Hollande said Blair was pleasant "and so intelligent he
didn't need to be arrogant". He added: "The first lesson to take from
Blair is how long he lasted ... Second, he was able, after a long period
of Thatcherism, to reinstate education, health and the public sector
... Then he succumbed to the dominant idea that the markets could
regulate themselves and the notion that the markets and [economic]
liberalism in themselves could be a factor for growth ... We saw the
consequences."

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15 February 2012
Last updated at 16:01











Eurozone states want Greece out, says Venizelos







Comments (66)






Evangelos Venizelos warned there were some eurozone members who no longer wanted Greece


Continue reading the main story














Global Economy

• 
  Europe struck by growth slowdown
  
• 
  Germany: Reasons to be cheerful
  
• 
  Q&A: Greek debt crisis
  
• 
  Timeline of crisis
  

Some eurozone countries no longer want Greece in the bloc, Finance Minister Evangelos Venizelos has said.

He accused the states of "playing with fire", as Greece
scrambled to finalise an austerity plan demanded by the EU and IMF in
return for a huge bailout.

Athens vowed to clarify the plan before a conference call with eurozone bosses, which was due to start at 16:00 GMT.

Greece needs to convince lenders that it will make enough savings, and that its politicians will enact the changes.

Athens is hoping to get a 130bn-euro (£110bn; $170bn) bailout from the EU and IMF.

The deal also includes a provision to write off a further 100bn euros of debt owed to banks.

Parliament approved a package of austerity measures on
Sunday, but eurozone ministers indicated that more detail needed to be
given on the cuts.

The ministers also insisted that the major Greek political
parties committed to implementing the cuts, regardless of who wins a
general election scheduled for April.



Continue reading the main story
“Start Quote

At the highest levels of government
in Germany, the Netherlands, Finland and Austria the attitude towards
Greece is one of scepticism. They don't believe the politicians in
Athens can deliver any more”

Gavin Hewitt
BBC Europe editor

• Losing patience with Greece
  

Leaders of the two main parties have now signed letters committing them to enacting the changes.

The leader of the conservative New Democracy party, Antonis
Samaras, wrote that if his party won in April it would "remain committed
to the programme's objectives, targets and key policies".

But he said that "policy modifications might be required to guarantee the full programme's implementation".

An official told the BBC that 325m euros of extra savings had
been made with cuts from defence, health and local government budgets.

Mr Venizelos said there were "very few remaining issues" with
the austerity package and promised to have them "fully clarified"
before the conference call.

But he also warned that some eurozone countries were "playing
with fire", saying: "There are many in the eurozone who don't want us
any more."

Mr Venizelos also said that President Karolos Papoulias had
volunteered to give up his salary as an "honourable... symbolic
gesture". He is reported to earn 280,000 euros a year.

'False rumours'
Without the bailout, Greece will be unable to pay its debts and will be forced into a default.

Its next payment is due on 20 March, and the complex
technicalities of finalising the bailout will take several weeks even
after the politicians have agreed the measures.

But the austerity plan has been hugely unpopular in Greece.



Continue reading the main story Greece crisis in numbers










Sources: ELSTAT, BBC



Anger boiled over during Sunday's
vote in parliament, when large groups of protesters clashed with riot
police and dozens of buildings were set on fire in Athens.

And eurozone countries appear to be running out of patience with Greece.

On Wednesday German Finance Minister Wolfgang Schaeuble told
local radio he wanted to help Greece, but "we are not going to pour
money into a bottomless pit", in comments translated by the AFP news
agency.

And unnamed eurozone officials were quoted suggesting that
Greece's latest assurances still may not be enough, because people no
longer trusted the country's politicians.

Greece has failed to deliver on many of the promises it made to secure an earlier bailout deal, EU officials say.

In a press briefing on Wednesday, German Chancellor Angela
Merkel's spokesman, Steffen Seibert, denied Germany wanted Greece out of
the eurozone.

"I can clearly state for the federal government that these rumours are false," he said.

Amadeu Altafaj, a spokesman for EU economics commissioner
Olli Rehn, said eurozone members had "stated very clearly that they want
Greece to remain a member of the eurozone".

However, the BBC's Matthew Price in Brussels says there is a
growing sense among eurozone members that if Greece did leave it would
not mean the collapse of the euro.

And in an interview in Manager Magazin to be published on
Friday, the head of Germany's engineering and electronics giant Bosch
calls for Greece to be ejected from the EU.

In a transcript acquired by Reuters, CEO Franz Fehrenbach
says: "This state with its phantom pensioners and rich people that don't
pay taxes, a state without a functioning administration, has no place
in the European Union."





Your comments (66)




M

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Migration and populations











Eurozone crisis

Euro-refugees get cold reception in Norway





15 February 2012

El País
Madrid




Francisco Zamora arrived in Bergen, Norway, in 2009 with 225 euros in his pocket



antena3







Fleeing unemployment, hundreds of Spanish are migrating
to idealised Norway in search of work. Few have had much luck. Many have
found only unemployment, cold and despair. Another chapter in the great
crisis afflicting Spain.



Carmen Pérez-Lanzac



"For a long time there’d been nothing to fall back on. My
parents, who are already elderly, had been paying my mortgage of 540
euros for a few months. Nothing was working out, and my prospects were
pretty dim. One night I was in a bar and the TV was on in the
background. The programme was Españoles en el mundo,
or “Spaniards Around the World”. A man came on who lived in northern
Norway, and he said he was earning 4,000 euros. He seemed pretty happy.
I said to myself, ‘Paco, you’ve got to get yourself up there.’"

Francisco Zamora, 44, of Alcantarilla (Murcia), is a quiet guy. He’s
wearing a scarf wrapped three times around his neck to keep out the
bitter cold. An electronics graduate, with experience in construction
and factories, he was once earning 3,000 euros a month. But all that
was left behind three years ago. Like him, hundreds of Spanish who have
been without work for months left a Spain in crisis with their sights
set on one of the richest countries in the world; the choice simply had
to be a good one.

But once there, the myths crumbled around them. Lacking both
qualification and languages, doors closed in their faces. The
authorities don’t want to know anything about them. Some have spent all
their savings and are barely surviving, and some are sleeping on the
street.

Last August, Paco asked his parents for more money and bought a
one-way ticket to Bergen. It was the first time he was out of Spain. In
his pocket he had 225 euros. The first week he spent wandering around
one of the most picturesque cities in the world.

“I carried a small rucksack that fit into the lockers at the train
station. I paid five kroner (0.75 euros) to use the bathroom and I
washed myself there. One day I met another Spaniard who told me about a
shelter where I could go during the day for food and to get warm.

Polar cold, the language, and exorbitant prices


The Robin Hood Foundation occupies two floors of a wooden house in
the center of Bergen. The hostel opened in 2003 "with the idea of
giving shelter to the poorer Norwegian families who can’t afford four
euros for a coffee in a bar,” explains Wenche Berg Husebo, the woman
who presides over this private foundation (which is funded with 270,000
euros of public money).

It's Wednesday morning, and in Robin Hood the main language you hear
is Spanish. Between 60 and 100 people pass through the house every
day. Half of them, says Mark Amano, its director, are Spaniards.
"Before it was Norwegians, Poles, a family of political refugees... But
in March, the Spaniards started arriving," explains Husebo. “Since
then 250 have come. At first they were men of all ages, and then single
women in their thirties. Then parents, some with their children. Most
don’t get a job because they don’t speak Norwegian or English."

Norway, with its oil, its enviable welfare state, its policies for
reconciling work and family life, and above all, high wages and
extremely low unemployment (at three percent) has seen a new breed of
emigrant arrive in recent months, pushed out of Spain by prolonged
unemployment and by progressive wage cuts. Norwegian newspapers have
dubbed them “refugee workers of the euro”.

Norwegian prosperity and that television programme Españoles en el mundo
(many name that programme when asked why they chose Norway; the last
three recent episodes devoted to the country had between 3.5 million
and 2.8 million viewers) have been a siren to a growing number of
Spanish (the number registering at the Spanish Embassy has grown from
358 in 2010 to 513 in 2011, although many are not registered).

Once in the country, though, they run up against an impassable
barrier consisting of three elements: the polar cold, the language, and
exorbitant prices. To rent a room costs 600 euros; a litre-carton of
milk, two euros.

“I have never seen such a distressing situation in Norway”


Although Norway has refused to join the European Union, it did sign
the Schengen Agreement, which gives free entry to EU citizens. However,
the country lacks the public infrastructure to support those who have
arrived with nothing in their pockets. “The government doesn’t offer
them housing, money or aid. That is left to Caritas, the Red Cross or
the Salvation Army,” explains Bernt Gulbrandsen of Caritas Oslo.

The local media have been quick to collect stories of these new
immigrants. In a country with only five million inhabitants, the news
has had an impact. In Bergen (260,000 inhabitants), a prosperous city
where there are few vagabonds, newspapers and radio stations have
devoted several articles to the arrivals. “They fled the crisis in
Spain, but life in Bergen isn’t like they had imagined,” says one
headline. Or: “Many of the euro refugees live in poverty in Bergen”.

“I have never seen such a distressing situation in Norway,” says
Astrid Dalehaug Norheim, one of the journalists who have covered this
subject for the newspaper Vårt Land. “It reminds me of a visit I made
to Moscow during the crisis of the late nineties, when Russians from
rural areas began to migrate to cities looking for work, but ended up
wrecked in shelters.”

The testimony of Tuna, one of the employees of the Red Cross in
Bergen, shows how some Norwegians see the situation: “Before it was
mainly Poles who came here, but then the Spanish started to arrive.
They have no food or work and ask for help. We do offer support to
political refugees, but not to those who come voluntarily.”




Translated from the Spanish by Anton Baer

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